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An Assessment of the Impact of Monetary Policy on Economic Growth in Nigeria: Toda-Yamamoto Approach

Author

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  • Okosu, Napoleon David

    (Department of Economics, Veritas University, Abuja, FCT- Nigeria)

  • Okoduwa, Dorothy Ivie

    (Department of Economics, Veritas University, Abuja, FCT- Nigeria)

  • Ita, Uyu Eyo

    (Department of Economics, Veritas University, Abuja, FCT- Nigeria)

  • Egonu, Daniel Ikenna

    (Department of Economics, Veritas University, Abuja, FCT- Nigeria)

Abstract

This study interrogated the impact of monetary policy on economic growth in Nigeria using annual time series data from 1981 to 2020. The paper used the growth rate of gross domestic product (GRGDP) as the endogenous variable, while, broad money supply (MS2), monetary policy rate (MPR), Inflation (INFL), liquidity ratio (LDQR) and exchange rate (EXCH) were the exogenous variables and proxies for monetary policy. Data were obtained from the Central Bank of Nigeria’s Statistical Bulletin of various years and World Bank National Account Data. The study used descriptive statistics, performed a unit root test using Augmented Dickey-Fuller, Autoregressive Distributed Lag (ARDL) Bound test, and to test for causality, Toda Yamamoto was deployed. Finally, the Toda Yamamoto Causality test revealed that all the exogenous variables had bi-directional causality with economic growth except for the exchange rate that had uni-directional causality with economic growth. In the light of the findings, the study recommends that Broad Money Supply (MS2) should be adequately managed and manipulated to achieve the needy growth, in line with pursued monetary policy stance of the monetary authority. Also, the monetary authority and the government should vigorously pursue policies that would increase financial inclusion in Nigeria as it would enhance the effectiveness of the monetary policy.

Suggested Citation

  • Okosu, Napoleon David & Okoduwa, Dorothy Ivie & Ita, Uyu Eyo & Egonu, Daniel Ikenna, 2022. "An Assessment of the Impact of Monetary Policy on Economic Growth in Nigeria: Toda-Yamamoto Approach," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(11), pages 537-547, November.
    • Handle: RePEc:bcp:journl:v:6:y:2022:i:11:p:537-547
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    References listed on IDEAS

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    1. Enock Nyorekwa Twinoburyo & Nicholas M Odhiambo, 2018. "Can Monetary Policy drive economic growth? Empirical evidence from Tanzania," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 12(2), June.
    2. Shobande Olatunji A., 2019. "Monetary Policy Spillovers Through Industrial Growth in Nigeria: A Time Series Analysis," Economics and Business, Sciendo, vol. 33(1), pages 94-110, January.
    3. srithilat, khaysy & Sun, Gang, 2017. "The Impact of Monetary Policy on Economic Development: Evidence from Lao PDR," MPRA Paper 79369, University Library of Munich, Germany, revised 27 Apr 2017.
    4. Micheal Chidiebere Ekwe & Amah Kalu Ogbonnaya & Cordelia Onyinyechi Omodero, 2017. "Monetary Policy and Nigeria¡¯s Economy: An Impact Investigation," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(11), pages 218-222, November.
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